Kim Eng on 28 Jan 2014
What’s New
Wing Tai reported a 45% YoY decline in 2QFY6/14 net profit to SGD48.4m, on the back of an 86% YoY plunge in associated income to SGD5.7m in the absence of divestment gains. The lower profit
was also a result of fewer completed units sold in the quarter, in particular Helios Residences which still has a balance of 15 units.
What’s Our View
In the coming quarters, we expect the bulk of the profits to be from the progressive recognition of Foresque Residences (95% sold, ASP SGD1,100 psf) and The Tembusu (76% sold, ASP SGD1,550 psf). The Crest at Prince Charles Crescent is likely to be launched within the next two months, and we expect an ASP of ~SGD1,750 psf (estimated breakeven SGD1,450 psf).
We remain convinced that Wing Tai’s strong balance sheet of 0.2x net gearing with cash of SGD663.7m will allow the company to tide over headwinds in the Singapore residential sector. Based on our forecasts, a sustainable dividend of 7 SGD cts/share is possible, which implies an attractive yield of 4% pa.
Following the acquisition of a commercial site in Shanghai for SGD225m, we expect Wing Tai to remain on the hunt for more acquisitions in China’s Tier 1 and developed Tier 2 cities.
Thursday, 30 January 2014
OSIM International
Kim Eng on 28 Jan 2014
FY13 results within expectations
OSIM’s FY13 revenue grew 8% YoY, with higher growth coming from South Asia compared with North Asia, where the group rationalised its store network in China (opened 24 and closed 30). However, with a successful marketing campaign in 2H13, sales in China picked up in 4Q13 as evidenced by the 13% YoY growth in North Asia. In our view, this market may surprise on the upside in FY14. The company also recognised some one-off items, though the net impact on P&L was negligible while the actual tangible item was limited to around SGD12m Brookstone bonds.
What’s Our View
We expect TWG to be a significant growth contributor going forward. Following the consolidation, we estimate TWG to contribute around 10% of group revenue currently, increasing to 20% by FY16E. With multiple growth engines in place and a very strong balance sheet, we believe OSIM will be better able to weather potential turbulence in its growth path. We keep our forecasts mostly unchanged and introduce FY16E. Our TP of SGD2.78 remains unchanged, pegged to 18x FY14E P/E.
FY13 results within expectations
OSIM’s FY13 revenue grew 8% YoY, with higher growth coming from South Asia compared with North Asia, where the group rationalised its store network in China (opened 24 and closed 30). However, with a successful marketing campaign in 2H13, sales in China picked up in 4Q13 as evidenced by the 13% YoY growth in North Asia. In our view, this market may surprise on the upside in FY14. The company also recognised some one-off items, though the net impact on P&L was negligible while the actual tangible item was limited to around SGD12m Brookstone bonds.
What’s Our View
We expect TWG to be a significant growth contributor going forward. Following the consolidation, we estimate TWG to contribute around 10% of group revenue currently, increasing to 20% by FY16E. With multiple growth engines in place and a very strong balance sheet, we believe OSIM will be better able to weather potential turbulence in its growth path. We keep our forecasts mostly unchanged and introduce FY16E. Our TP of SGD2.78 remains unchanged, pegged to 18x FY14E P/E.
CDL Hospitality Trusts
CIMB Research, Jan 29
FOR FY2013, CDL Hospitality Trusts (CDL-HT) registered a drop in both net property income (NPI) and distributable income by 1.4 per cent and 3.1 per cent, respectively. Revenue per available room (RevPAR) for the quarter dropped to $187, due mainly to lower gross revenue from its Singapore hotels and forex losses. This was mitigated by additional rental contributions of $10 million from Angsana Velavaru, Maldives.
As the global economy continues to recover, we expect corporate spending to strengthen correspondingly in FY2014. With about half of total revenue coming from this source, we expect CDL-HT earnings to strengthen.
In addition, as bi-annual events such as the Aerospace show and Food & Hotel Asia take place this year, coupled with more MICE events, we expect the hospitality market to benefit as a whole.
However, with 2,926 rooms coming online in FY2014, the positive tone is expected to be dampened by the additional competition as the market digests the additional supply.
CDL-HT is trading at 7.0 per cent/7.4 per cent FY2014/2015 dividend yield. As the positive tone of the hospitality sector outweighs the additional supply of hotel rooms in FY2014 and with CDL-HT continuing to benefit from the strong RevPAR growth of its two Maldives hotels, we believe a turnaround for the stock is imminent.
Upgrade to an "add" with unchanged dividend discount model-based TP of $1.79 as management continues to boost earnings via potential acquisitions in countries, such as Japan, Australia and Asia.
ADD
SMRT Corporation
Maybank Kim Eng, Jan 29
SMRT reported another disappointing set of numbers for Q3 FY2013/14, with net profit plunging 44 per cent y-o-y to $14.2 million. The combined operating loss for its fare-based business stood at $9.0 million, reflecting the challenging business environment for public transport operators. On the bright side, Q3 FY2013/14's rental profits improved 9.2 per cent y-o-y to $18.5 million.
We maintain our negative view on the stock. While the fare increase from April 2014 would give SMRT an estimated net benefit of $13.2 million per annum, or $3.3 million per quarter, we do not think this is enough to offset losses in view of the current run-rate of $9 million per quarter for its fare business. Furthermore, SMRT faces the threat of cannibalisation when Stage 2 of the Downtown Line opens in 2016, which puts approximately 17 per cent of its fare revenue at risk.
While transiting to a sustainable business model for its train and bus operations appears imminent, we argue that it is highly speculative to conclude that the transition terms will be favourable to shareholders. Our TP of $0.60 is based on 14x FY3/2014-2016E P/E. Maintain "sell".
SELL
Global Premium Hotels
OCBC on 29 Jan 2014
4Q13 results for Global Premium Hotels (GPH) were in-line with our expectations. Total revenue fell 1.4% YoY to S$15.0m and gross profit rose 0.9% to S$13.2m. Net profit climbed 20.1% to S$5.2m. FY13 revenue and EPS came to 100% and 105% of our prior respective full-year estimates. Under other comprehensive income, GPH saw revaluation gain of land and hotel buildings of S$259.5m. This helped to boost NAV to 64.0 S cents as of end-Dec from 39.6 S cents as of end-Sep. We understand that recent transactions in the industry drove these revaluations. We maintain our FV of S$0.33 and BUY rating on GPH. The opening of the second Parc Sovereign hotel in 1H14 should lead to a significant earnings boost from 2H14.
4Q13 results as expected
4Q13 results for Global Premium Hotels (GPH) were in-line with our expectations. Total revenue fell 1.4% YoY to S$15.0m and gross profit rose 0.9% to S$13.2m. Administrative expenses contracted by 4.5% YoY to S$5.3m. Finance costs declined 9.4% to S$2.1m due to partial repayment of term loans and lower average interest rate. 4Q13 net profit climbed 20.1% to S$5.2m. FY13 revenue and EPS came to 100% and 105% of our prior respective full-year estimates. Under other comprehensive income, GPH saw revaluation gain of land and hotel buildings of S$259.5m. This helped to boost NAV to 64.0 S cents as of end-Dec from 39.6 S cents as of end-Sep. We understand that recent transactions in the industry drove the revaluations.
RevPAR more resilient than subsector’s
4Q13 hotel room revenue fell by S$0.2m or 1.2% YoY to S$14.7m. The decline was due to: (1) S$0.1m lower revenue contribution from Fragrance Hotel – Elegance, which ceased operation following the expiry of its tenancy agreement on 25 Nov 2013 (GPH operated but did not own this hotel), and (2) S$0.6m lower revenue recognised from the remaining hotels. The decrease was partially offset by S$0.5m in higher revenue from Fragrance Hotel-Ruby following asset enhancement works. GPH’s average occupancy rate decreased 3.1 ppt YoY to 88.3% and RevPAR decreased by 5.3% YoY to S$92.3. GPH's operational performance figures continue to be significantly better than its peer group's. Singapore hotels in the Economy category saw RevPAR in Oct, Nov and Dec 2013 fall by 11.1% and 18.7% and 15.9% respectively on a YoY basis, according to the STB. GPH management expects 2014 to remain a challenging year for the local hospitality industry given the expanding hotel room supply and uncertainties in the global economy.
Maintain BUY
We maintain our FV of S$0.33 and BUY rating on GPH. The opening of the second Parc Sovereign hotel in 1H14 should lead to a significant earnings boost from 2H14.
4Q13 results for Global Premium Hotels (GPH) were in-line with our expectations. Total revenue fell 1.4% YoY to S$15.0m and gross profit rose 0.9% to S$13.2m. Administrative expenses contracted by 4.5% YoY to S$5.3m. Finance costs declined 9.4% to S$2.1m due to partial repayment of term loans and lower average interest rate. 4Q13 net profit climbed 20.1% to S$5.2m. FY13 revenue and EPS came to 100% and 105% of our prior respective full-year estimates. Under other comprehensive income, GPH saw revaluation gain of land and hotel buildings of S$259.5m. This helped to boost NAV to 64.0 S cents as of end-Dec from 39.6 S cents as of end-Sep. We understand that recent transactions in the industry drove the revaluations.
RevPAR more resilient than subsector’s
4Q13 hotel room revenue fell by S$0.2m or 1.2% YoY to S$14.7m. The decline was due to: (1) S$0.1m lower revenue contribution from Fragrance Hotel – Elegance, which ceased operation following the expiry of its tenancy agreement on 25 Nov 2013 (GPH operated but did not own this hotel), and (2) S$0.6m lower revenue recognised from the remaining hotels. The decrease was partially offset by S$0.5m in higher revenue from Fragrance Hotel-Ruby following asset enhancement works. GPH’s average occupancy rate decreased 3.1 ppt YoY to 88.3% and RevPAR decreased by 5.3% YoY to S$92.3. GPH's operational performance figures continue to be significantly better than its peer group's. Singapore hotels in the Economy category saw RevPAR in Oct, Nov and Dec 2013 fall by 11.1% and 18.7% and 15.9% respectively on a YoY basis, according to the STB. GPH management expects 2014 to remain a challenging year for the local hospitality industry given the expanding hotel room supply and uncertainties in the global economy.
Maintain BUY
We maintain our FV of S$0.33 and BUY rating on GPH. The opening of the second Parc Sovereign hotel in 1H14 should lead to a significant earnings boost from 2H14.
Wednesday, 29 January 2014
Jaya Holdings
DMG & PARTNERS RESEARCH, Jan 28
AS we highlighted in the previous quarter, Jaya's strong chartering performance is suffering a 25 per cent drag by the under-utilised shipyards. We note that three vessels have had their delivery times delayed by 1-2 months, which will push back their contribution to Jaya's growth.
We applaud management's decision to become more transparent in revealing its contract coverage, which indicates US$25-28 million worth of firm and optional contracts for Q3-Q4 FY2014. Vessel utilisation - while a still-healthy 83 per cent in Q2 FY2014 - came off from 91 per cent in Q1 FY2014. Based on the contract coverage figures, maintaining these utilisation rates will be a challenge, but potentially attainable.
Customer exercises purchase option on anchor handling tug supply (AHTS) vessel: Management also revealed that a customer has exercised its option to purchase a 5,000 brake horsepower (bhp) AHTS vessel. Together with an expected 16,000bhp AHTS vessel sale, Jaya estimates a US$3 million profit from these purchases. While this boosts short-term profit, long-term earnings growth takes another hit.
Jaya is now trading at a 14x FY14F P/E premium and the stock is back to near book value, even though ROE is only 7 per cent. This valuation is supported by a high 5-6 per cent yield, representing a 66-79 per cent payout ratio. With slow mid-term growth and limited dividend upside, we feel that the stock is fully priced for a pro-shareholder outcome in the ongoing strategic review.
We prefer Nam Cheong for exposure to the OSV segment. We expect its share price to outperform over the next 12 months, as it is trading at 7x FY2014F P/E, with 25 per cent growth and 25 per cent ROE.
NEUTRAL
Wing Tai Holdings
CIMB RESEARCH, Jan 28
H1 FY2014 operating profit dropped 26 per cent y-o-y, largely because of lower contributions from development properties.
We expect the weak earnings to persist given that most of its remaining projects remain unsold, with the exception of The Tembusu. We estimate that the unsold projects account for about 30 per cent of its gross asset value (GAV).
Increasing China exposure. In our recent meeting with management, it highlighted its intention to increase its China exposure in light of the weak Singapore residential market. In the last quarter, Wing Tai (WT) was awarded a tender for a 8,593.9-square-metre site in the Shanghai Huangpu District for 1.1 billion yuan (S$232 million). This works out to 42,821 yuan psm, which is higher than the 37,264 yuan psm paid by Sun Hung Kai for a commercial site in Xujiahui and the 40,106 yuan psm paid by the K Wah Group for a residential site in Pudong.
We believe that the price is on the high side as data from Savills Research showed that Q3 2013 strata-titled and en-bloc offices in the Pudong district transacted at an average of 61,094 yuan psm and 7,430 yuan psm, respectively.
We maintain a "hold" rating. WT is not without its problems given its high-end Singapore exposure and cost pressures. However, its shares trade at a historically low 0.49x FY2014 P/BV and its balance sheet is strong at about 9 per cent net gearing. We maintain our "hold" rating and will revisit the stock on stronger-than-expected sales.
HOLD
Nam Cheong
DBS GROUP RESEARCH, Jan 28
NAM Cheong started off 2014 with sales of five vessels worth US$70 million to a repeat customer, Sentinel Marine, which in an emerging offshore support vessel (OSV) player based in Aberdeen. This comes on the back of sales of four vessels in end-December 2013 worth US$66 million.
With these sales, Nam Cheong has already sold 17 of the 25 vessels in its 2014 built-to-stock work programme. The 2015 built-to-stock programme is likely to be announced in the near term but, for now, we have assumed a similar size to the 2014 programme, hence upside potential remains.
Our forecasts for Nam Cheong don't include any future build-to-order wins. Hence, this round of contract wins boosts our revenue and earnings estimates for FY2014/2015.
Combined with some housekeeping adjustments for translation effects of currency exchange rates, our earnings estimates for FY2014/2015 is revised up by about 5 per cent. The weaker MYR-USD exchange rate can also potentially have a beneficial impact on shipbuilding margins, which we haven't taken into account.
Expect healthy net profit CAGR of 26 per cent over FY2012-2015; maintain "buy" with a slightly higher TP of $0.43, pegged to 10x FY2014 earnings. Catalysts expected from strong quarterly earnings delivery and further order wins.
BUY
First Resources
Uobkayhian on 29 Jan 2014
FY13F PE (x): 13.7
FY14F PE (x): 13.0
2013 results to exceed our expectation. First Resources (FR) is scheduled to release its full-year results on 25 Feb 14. Its 2013 net profit is likely to exceed our expectation on the back of better-than-expected FFB production and higher-than-expected CPO ASP while contribution from downstream is likely to have remained healthy as it switched to biodiesel production to ensure healthy margin amid narrowing refining margin in Indonesia as large new capacities came on-stream in 2H13.
Maintain BUY with target price of S$2.60 based on 15x 2015F EPS of 13.9 US cents. FR remains one of our top picks in the plantation sector for its attractive profile age, cost- efficient estates and hands-on management.
FY13F PE (x): 13.7
FY14F PE (x): 13.0
2013 results to exceed our expectation. First Resources (FR) is scheduled to release its full-year results on 25 Feb 14. Its 2013 net profit is likely to exceed our expectation on the back of better-than-expected FFB production and higher-than-expected CPO ASP while contribution from downstream is likely to have remained healthy as it switched to biodiesel production to ensure healthy margin amid narrowing refining margin in Indonesia as large new capacities came on-stream in 2H13.
Maintain BUY with target price of S$2.60 based on 15x 2015F EPS of 13.9 US cents. FR remains one of our top picks in the plantation sector for its attractive profile age, cost- efficient estates and hands-on management.
HAFARY HOLDINGS
UOBKayhian on 29 Jan 2014
VALUATION
VALUATION
- Maintain BUY but with a lower target price of S$0.305 (previously S$0.33).
- We maintained our net profit forecast for FY14 but lower our FY15 and FY16 profit forecasts by 3.9% and 9.3% respectively on the more cautious outlook. We rolled forward our valuation of Hafary’s building materials supply business and peg it at 14.2x 2015F PE (EPS of 2.16 S cents).
- Currently, Hafary is trading at an undemanding valuation of 8.9x 2015F PE with an attractive FY14F dividend yield of 6.5%, based on FY14F DPS of S$0.0125
- Results in line with estimates. Hafary continued to see growth, with revenue up 15% yoy to S$48.9m (51% of our full-year forecast). Excluding the one-time gain on disposal of S$22.7m in 1HFY13, profit before tax fell S$0.57m (-10% yoy) to S$5.73m, which forms 53% of our full-year forecast.
- The decline in profitability was due mainly to the increase in depreciation from the addition in PPE, and an increase in other expenses. Gross margin was also lower at 38.6% (1HFY13: 41.6%) due to a higher mix of project sales.
- 1.0 S cent interim dividend declared. Based only on the interim dividend of S$0.01, this already translates to an attractive dividend yield of 5.3%.
- Growing momentum in a new market, Vietnam. During 1HFY14, Hafary saw a performance improvement in its associate company VCI, as the economic climate in Vietnam improved. VCI’s contribution increased by S$0.4m to S$0.5m 1HFY14.
- Stock implications. In the absence of a special dividend in FY14 (after a dividend bonanza of 5.25 S cents declared in FY13), we believe the recent weakness in price action could be attributed to investors cashing out after the stock went ex-dividend. Negative sentiment from a weaker property outlook is also likely to have been a drag on share price.
- Backlog of projects to support near-term earnings. While the tapering in HDB supply from 2014 is likely to hurt sentiment, the huge backlog of new residential units will support near-term earnings of Hafary. According to estimates by MND, more than 170,000 new residential units are expected to be completed in 2014-17.
- Lowered our FY15 and FY16 profit forecasts. On the back of the more cautious outlook, we lowered our FY15 and FY16 profit forecasts by 3.9% and 9.3% respectively. Further improvement in VCI may help partially offset the drop in local demand.
OSIM International
OCBC on 28 Jan 2014
OSIM International Ltd (OSIM) reported a good set of 4Q13 results which saw revenue and PATMI increasing by 15.5% and 22.1% YoY to S$178.6m and S$27.6m, respectively. This was in line with our expectations. It also declared a final dividend of S$0.02/share, bringing total FY13 DPS to S$0.06. Notably, OSIM has now delivered 20 consecutive quarters of YoY PATMI growth since 1Q10. In our view, this growth has been underpinned by management’s strong execution capabilities amid its continuous product innovation drive and efforts to boost its brand profile and efficiency gains. We believe this warrants a re-rating in OSIM’s share price and hence assign a higher target peg of 18x (previously 16.5x) to our FY14F EPS forecast, which we revise upwards by 3.3%. This lifts our fair value estimate on OSIM from S$2.56 to S$2.90. Maintain BUY.
Achieves 20 consecutive quarters of YoY PATMI growth
OSIM International Ltd (OSIM) reported a good set of 4Q13 results which saw revenue and PATMI increasing by 15.5% and 22.1% YoY to S$178.6m and S$27.6m, respectively. This was in line with our expectations, with FY13 revenue of S$647.6m (+7.6%) and PATMI of S$101.6m (+16.9%). OSIM has now delivered 20 consecutive quarters of YoY PATMI growth since 1Q10, which we view as a remarkable feat. In our view, this growth has been underpinned by management’s strong execution capabilities amid its continuous product innovation drive and efforts to boost its brand profile and efficiency gains.
Healthy dividends trend continues
OSIM also declared a final dividend of S$0.02/share, matching our forecast. This brings total FY13 DPS to S$0.06 (FY12: S$0.04 ordinary DPS and S$0.02 special DPS), which translates into a yield of 2.5%. OSIM’s consistent track record of paying dividends has been buttressed by its strong balance sheet (end FY13 net cash of S$112.7m) and S$93.6m of healthy free-cashflows generated in FY13.
Enhancing its brand equity
4Q13 was the first quarter in which OSIM consolidated TWG-Tea in its financials. It recently raised its equity stake in TWG-Tea by 16.3 ppt to 70% on 19 Jan 2014 and we expect this to provide OSIM with another leg of growth in the luxury tea market. TWG Tea has 26 outlets as at 31 Dec 2013, and has plans to open another 20 outlets in 2014 (of which approximately half will be under franchisee model). We raise our FY14 PATMI forecast by 3.3% to take into account this development, coupled with slightly higher gross margin assumptions. We also introduce our FY15 estimates. Given OSIM’s solid execution track record and success in enhancing its brand equity which we believe will shape its sustainable growth trajectory, we assign a higher target peg of 18x (previously 16.5x) to our forecasted FY14F EPS. This lifts our fair value estimate on OSIM from S$2.56 to S$2.90. Maintain BUY.
OSIM International Ltd (OSIM) reported a good set of 4Q13 results which saw revenue and PATMI increasing by 15.5% and 22.1% YoY to S$178.6m and S$27.6m, respectively. This was in line with our expectations, with FY13 revenue of S$647.6m (+7.6%) and PATMI of S$101.6m (+16.9%). OSIM has now delivered 20 consecutive quarters of YoY PATMI growth since 1Q10, which we view as a remarkable feat. In our view, this growth has been underpinned by management’s strong execution capabilities amid its continuous product innovation drive and efforts to boost its brand profile and efficiency gains.
Healthy dividends trend continues
OSIM also declared a final dividend of S$0.02/share, matching our forecast. This brings total FY13 DPS to S$0.06 (FY12: S$0.04 ordinary DPS and S$0.02 special DPS), which translates into a yield of 2.5%. OSIM’s consistent track record of paying dividends has been buttressed by its strong balance sheet (end FY13 net cash of S$112.7m) and S$93.6m of healthy free-cashflows generated in FY13.
Enhancing its brand equity
4Q13 was the first quarter in which OSIM consolidated TWG-Tea in its financials. It recently raised its equity stake in TWG-Tea by 16.3 ppt to 70% on 19 Jan 2014 and we expect this to provide OSIM with another leg of growth in the luxury tea market. TWG Tea has 26 outlets as at 31 Dec 2013, and has plans to open another 20 outlets in 2014 (of which approximately half will be under franchisee model). We raise our FY14 PATMI forecast by 3.3% to take into account this development, coupled with slightly higher gross margin assumptions. We also introduce our FY15 estimates. Given OSIM’s solid execution track record and success in enhancing its brand equity which we believe will shape its sustainable growth trajectory, we assign a higher target peg of 18x (previously 16.5x) to our forecasted FY14F EPS. This lifts our fair value estimate on OSIM from S$2.56 to S$2.90. Maintain BUY.
Tuesday, 28 January 2014
Overseas Union Enterprise
UOBKayhian on 28 Jan 2014
FY14F DPU Yld (%): 8.8
FY15F DPU Yld (%): 1.7
6.3% special dividend in sight. OUE has announced a one-for-six distribution in specie of OUE Hospitality Trust (OUE H-Trust), equivalent to S$0.15 dividend or 6.3% yield, contingent on the divestment of OUE Bayfront to OUE Commercial REIT. OUE will retain 33-35% of OUE H-Trust post divestment, down from 45% currently. With the successful divestment and listing, OUE will likely announce the special dividend within the next quarter.
Maintain BUY with a lower target price of S$3.04, pegged at a 30% discount to our RNAV of S$4.34/share. OUE is trading at a deep 45% discount to our RNAV.
FY14F DPU Yld (%): 8.8
FY15F DPU Yld (%): 1.7
6.3% special dividend in sight. OUE has announced a one-for-six distribution in specie of OUE Hospitality Trust (OUE H-Trust), equivalent to S$0.15 dividend or 6.3% yield, contingent on the divestment of OUE Bayfront to OUE Commercial REIT. OUE will retain 33-35% of OUE H-Trust post divestment, down from 45% currently. With the successful divestment and listing, OUE will likely announce the special dividend within the next quarter.
Maintain BUY with a lower target price of S$3.04, pegged at a 30% discount to our RNAV of S$4.34/share. OUE is trading at a deep 45% discount to our RNAV.
Oversea-Chinese Banking Corporation
UOBKayhian on 28 Jan 2014
FY13F PE (x): 12.2
FY14F PE (x): 11.5
Bank NISP was established at Bandung in 1941. It became a commercial bank in 1967 and was listed in 1994. Bank NISP was conservatively managed and weathered the Asian Financial Crisis without any government support. OCBC first acquired a 22.5% stake in Bank NISP in 2004. OCBC continued to increase its stake and currently owns 85.1% of OCBC NISP. Bank NISP merged with OCBC Indonesia to form OCBC NISP in 2011.
Expansion in Indonesia aligned to strategic plan. OCBC plans to generate growth overseas and enlarge its franchise in Indonesia and China to overcome slower growth domestically in Singapore as part of its New Horizon III Strategic Plan (2011-15). OCBC NISP has embarked on a 171-for-500 rights issue at Rp1,200 to raise Rp3.5t. The rights proceeds strengthens OCBC NISP’s capital base to support business growth.
Maintain BUY. Our target price of S$12.45 is based on 1.71x 2014F P/B, derived from Gordon Growth Model (ROE: 12.0%, required return: 7.8% and growth: 2.0%).
FY13F PE (x): 12.2
FY14F PE (x): 11.5
Bank NISP was established at Bandung in 1941. It became a commercial bank in 1967 and was listed in 1994. Bank NISP was conservatively managed and weathered the Asian Financial Crisis without any government support. OCBC first acquired a 22.5% stake in Bank NISP in 2004. OCBC continued to increase its stake and currently owns 85.1% of OCBC NISP. Bank NISP merged with OCBC Indonesia to form OCBC NISP in 2011.
Expansion in Indonesia aligned to strategic plan. OCBC plans to generate growth overseas and enlarge its franchise in Indonesia and China to overcome slower growth domestically in Singapore as part of its New Horizon III Strategic Plan (2011-15). OCBC NISP has embarked on a 171-for-500 rights issue at Rp1,200 to raise Rp3.5t. The rights proceeds strengthens OCBC NISP’s capital base to support business growth.
Maintain BUY. Our target price of S$12.45 is based on 1.71x 2014F P/B, derived from Gordon Growth Model (ROE: 12.0%, required return: 7.8% and growth: 2.0%).
Mapletree Greater China Commercial Trust
DBS Group Research, Jan 27
MAPLETREE Greater China Commercial Trust booked $65.7 million revenue in Q3, 10 per cent better than forecast, while net property income (NPI) was ahead by 13 per cent at $53.8 million and distribution income by 17 per cent at $40.6 million. 9M FY2014 profit is 78 per cent of our full-year estimate.
The better-than-projected results were driven by higher operating income, cost savings and lower interest expense.
Distribution income translated into 1.52 cents DPU or 7.5 per cent annualised yield.
Income growth was driven by higher contributions from Festival Walk and Gateway Plaza in Beijing. Festival Walk enjoyed positive rental reversion of 20-22 per cent, with tenant sales growing 5.6 per cent in 9M FY2014 and 6.6 per cent higher shopper footfall. There was slight frictional vacancy at Gateway Plaza but the property has remained popular with 97 per cent occupancy this month. It benefited from 78 per cent rental uplift from expiring leases in Q3.
More importantly, rents are being renewed at 320-360 yuan ($67-$76) per sq m per month in this micromarket, despite weakness in the Beijing office market.
Hedged income will reduce forex impact. About 7 per cent of leases at Festival Walk and 1 per cent in Gateway Plaza are due to be recontracted in FY2014, and another 19 per cent and 9 per cent in FY2015.
Given prospect of positive economic growth in Hong Kong as well as limited supply and continued appetite for office space in its micromarket in Beijing, the trust will continue to enjoy robust income growth. In addition, 71 per cent of its interest cost is fixed until end FY2016, minimising the potential impact of rising financing costs.
In terms of capital management, its balance sheet remains healthy with gearing at 41 per cent. The manager has also hedged 100 per cent of FY2014 and 90 per cent of FY2015 Hong Kong-dollar income and is progressively converting yuan distributable income to Singapore dollar to reduce the impact of forex volatility.
Following the recent price weakness, we upgrade Mapletree Greater China trust to "buy" with a target price of $0.97. At the current price, it offers FY2015 DPU yield of 7.5 per cent and 27-28 per cent total return.
BUY
Monday, 27 January 2014
Singapore Property
UOBKayhian on 27 Jan 2014
The Urban Redevelopment Authority's (URA) real estate statistics for 4Q13 shows that prices of residential, office, retail and industrial properties changed -0.9% qoq (1.1% yoy), 0.5% (5.2% yoy), 0.0% (4.3% yoy) and -3.3% (3.2% yoy) respectively. Rentals for residential, office, retail and industrial properties adjusted by -0.5% (0.9% yoy), 0.6% (1.3% yoy), 0.1 % (-0.9% yoy) and 0.2% (5% yoy) respectively.
The recovery in the office sector is gaining momentum while the residential and industrial sectors are turning down. The retail segment is expected to remain stable. We prefer deep value and diversified stocks with exposure to the office sector. Top picks include CapitaCommercial Trust, Suntec REIT, Keppel Land and Ho Bee.
The Urban Redevelopment Authority's (URA) real estate statistics for 4Q13 shows that prices of residential, office, retail and industrial properties changed -0.9% qoq (1.1% yoy), 0.5% (5.2% yoy), 0.0% (4.3% yoy) and -3.3% (3.2% yoy) respectively. Rentals for residential, office, retail and industrial properties adjusted by -0.5% (0.9% yoy), 0.6% (1.3% yoy), 0.1 % (-0.9% yoy) and 0.2% (5% yoy) respectively.
The recovery in the office sector is gaining momentum while the residential and industrial sectors are turning down. The retail segment is expected to remain stable. We prefer deep value and diversified stocks with exposure to the office sector. Top picks include CapitaCommercial Trust, Suntec REIT, Keppel Land and Ho Bee.
ParkwayLife REIT
UOBKayhian on 27 Jan 2014
FY14F DPU Yld (%): 5.1
FY15F DPU Yld (%): 5.2
Results in line with expectations. Parkway Life REIT (PLife) reported 4Q13 distributable income of S$17.0m (+4.5% yoy, +5.8% qoq) and DPU of 2.82 cents (+4.5% yoy, +6.0% qoq). Full year DPU of 10.75 cents (+4.2%) is in line with our expectation, accounting for 99.5% of our estimate. Maintain HOLD and target price of S$2.47, based on DDM (required rate of return:6.4%, terminal:1.8%). Entry price is at S$2.15.
FY14F DPU Yld (%): 5.1
FY15F DPU Yld (%): 5.2
Results in line with expectations. Parkway Life REIT (PLife) reported 4Q13 distributable income of S$17.0m (+4.5% yoy, +5.8% qoq) and DPU of 2.82 cents (+4.5% yoy, +6.0% qoq). Full year DPU of 10.75 cents (+4.2%) is in line with our expectation, accounting for 99.5% of our estimate. Maintain HOLD and target price of S$2.47, based on DDM (required rate of return:6.4%, terminal:1.8%). Entry price is at S$2.15.
Starhill Global REIT
UOBKayhian on 27 Jan 2014
FY14F DPU Yld (%): 6.5
FY15F DPU Yld (%): 6.5
Results in line with expectations. Starhill Global REIT (Starhill) reported 4Q13 distributable income of S$26.5m (+20.6%yoy, +1.5% qoq) and a DPU of 1.23 S cents (+8.8% yoy, +1.7% qoq). Full-year 2013 DPU of 5.0 S cents (+13.9%) is in line with expectations, accounting for 100% of our 2013 forecasts. Maintain BUY with an unchanged target price of S$0.93 based on DDM (required rate of return: 7.0%, terminal growth: 1.8%).
FY14F DPU Yld (%): 6.5
FY15F DPU Yld (%): 6.5
Results in line with expectations. Starhill Global REIT (Starhill) reported 4Q13 distributable income of S$26.5m (+20.6%yoy, +1.5% qoq) and a DPU of 1.23 S cents (+8.8% yoy, +1.7% qoq). Full-year 2013 DPU of 5.0 S cents (+13.9%) is in line with expectations, accounting for 100% of our 2013 forecasts. Maintain BUY with an unchanged target price of S$0.93 based on DDM (required rate of return: 7.0%, terminal growth: 1.8%).
Fortune REIT
OCBC on 27 Jan 2014
FRT reported 4Q13 results that were in line with ours and the street's expectations. Revenue rose 34.6% YoY to HK$392.6m chiefly due to contribution from Fortune Kingswood from Oct 2013, as well as higher occupancy rates and strong rental growth across the portfolio. Net property income was up 33.0% at HK$275.2m. Income available for distribution climbed 27.8% YoY to HK$182.1m. DPU increased by 16.1% to 9.72 HK cents because of the placement units (representing an increase of 8.4% over the number of prior units) issued on 6 Aug 2013. Raising the cost of equity to 8.5% from 7.9%, we lower our FV on FRT to HK$6.28 from HK$7.01. We maintain our BUY rating on FRT.
Kingswood tenant repositioning
FRT reported 4Q13 results that were in line with ours and the street's expectations. Revenue rose 34.6% YoY to HK$392.6m chiefly due to contribution from Fortune Kingswood from Oct 2013, as well as higher occupancy rates and strong rental growth across the portfolio. Net property income was up 33.0% at HK$275.2m. Income available for distribution climbed 27.8% YoY to HK$182.1m. DPU increased by 16.1% to 9.72 HK cents because of the placement units (representing an increase of 8.4% over the number of prior units) issued on 6 Aug 2013. Occupancy for the Kingswood has increased to 99.0% from 95.5% at acquisition. The Jockey Club, which previously occupied 12,350 sqft on the ground floor, has been relocated to the first floor, and the original prime space is being subdivided and 100% pre-committed by new retail F&B tenants. Kingswood is positioned for rental growth with 46.5% of leases expiring in 2014 (low base). FRT's portfolio saw its valuation increase by 45.2% to HK$29.3b, including HK$6.0b from Kingswood. The original portfolio's valuation increased by 15.3% YoY. Cap rates were mostly unchanged; portfolio weighted average retail cap rate was at 4.7%.
Opportunities in 2014
Portfolio occupancy was strong at 98.7% as at end Dec. Average rental reversion was 20.4% for FY13 and average passing rent for the original portfolio was higher by 9.0% to HK$33.5 psf. The HK$15m AEI at Ma On Shan Plaza, with works to downsize and subdivide the supermarket for more retail and F&B outlets, was completed in Dec 2013 and achieved ROI of 60%. In 2014, Fortune Metropolis has 69% of total GRA expiring and Provident Square has anchor tenant space expiring, providing repositioning opportunities. This year will also see the beginning of a HK$80m capex AEI on Belvedere Square with target completion by end 2015. Target ROI is 15%.
Maintain BUY
Raising the cost of equity to 8.5% from 7.9%, we lower our FV on FRT to HK$6.28 from HK$7.01. We maintain our BUY rating on FRT.
FRT reported 4Q13 results that were in line with ours and the street's expectations. Revenue rose 34.6% YoY to HK$392.6m chiefly due to contribution from Fortune Kingswood from Oct 2013, as well as higher occupancy rates and strong rental growth across the portfolio. Net property income was up 33.0% at HK$275.2m. Income available for distribution climbed 27.8% YoY to HK$182.1m. DPU increased by 16.1% to 9.72 HK cents because of the placement units (representing an increase of 8.4% over the number of prior units) issued on 6 Aug 2013. Occupancy for the Kingswood has increased to 99.0% from 95.5% at acquisition. The Jockey Club, which previously occupied 12,350 sqft on the ground floor, has been relocated to the first floor, and the original prime space is being subdivided and 100% pre-committed by new retail F&B tenants. Kingswood is positioned for rental growth with 46.5% of leases expiring in 2014 (low base). FRT's portfolio saw its valuation increase by 45.2% to HK$29.3b, including HK$6.0b from Kingswood. The original portfolio's valuation increased by 15.3% YoY. Cap rates were mostly unchanged; portfolio weighted average retail cap rate was at 4.7%.
Opportunities in 2014
Portfolio occupancy was strong at 98.7% as at end Dec. Average rental reversion was 20.4% for FY13 and average passing rent for the original portfolio was higher by 9.0% to HK$33.5 psf. The HK$15m AEI at Ma On Shan Plaza, with works to downsize and subdivide the supermarket for more retail and F&B outlets, was completed in Dec 2013 and achieved ROI of 60%. In 2014, Fortune Metropolis has 69% of total GRA expiring and Provident Square has anchor tenant space expiring, providing repositioning opportunities. This year will also see the beginning of a HK$80m capex AEI on Belvedere Square with target completion by end 2015. Target ROI is 15%.
Maintain BUY
Raising the cost of equity to 8.5% from 7.9%, we lower our FV on FRT to HK$6.28 from HK$7.01. We maintain our BUY rating on FRT.
Starhill Global REIT
OCBC on 27 Jan 2014
Starhill Global REIT (SGREIT) reported an 8.8% YoY growth in its 4Q13 DPU to 1.23 S cents, coming in within our expectations. For the quarter, Singapore portfolio continued to deliver good performance, thereby increasing its percentage revenue contribution to 65.5% from 63.0% in 4Q12. Notably, Ngee Ann City retail NPI gained 16.6% YoY amid 6.7% rental uplift from Toshin master lease renewal in 2Q. In addition, SGREIT saw a S$137.5m revaluation gain in its portfolio. As a result, gearing ratio improved by 1.6ppt QoQ to 29.0%, while book value rose by 7.3% QoQ to S$0.92. This implies a 0.82x P/B, the lowest within the local retail space. We maintain BUY on SGREIT, but revise our fair value to S$0.90 from S$0.95 to reflect higher risk-free rate and risk premium assumptions.
Closing FY13 on strong note
Starhill Global REIT (SGREIT) turned in a firm set of 4Q13 results last Friday. NPI rose by 3.4% YoY to S$38.8m due to higher contribution from Singapore properties and Plaza Arcade acquired in 1Q13, while distributable income climbed 9.5% to S$27.2m. DPU was up 8.8% YoY to 1.23 S cents, after retaining S$0.5m (c. 0.02 S cents) for working capital. This brings the FY13 DPU to 5.00 S cents (+13.9%), in line with our annual DPU forecast of 4.95 S cents (consensus: 4.90 S cents). Based on last traded price, DPU yield was at 6.6%, higher than the average yield of 5.7% seen among its domestic retail peers.
Sustained growth in Singapore portfolio
Singapore portfolio continued to deliver good performance, thereby increasing its percentage revenue contribution to 65.5% from 63.0% in 4Q12. Notably, Ngee Ann City retail NPI gained 16.6% YoY amid 6.7% rental uplift from Toshin master lease renewal in 2Q. In addition, Wisma Atria retail NPI saw a 5.0% increase, driven by positive rental reversion of 8.1% in 2013 and ongoing asset repositioning post refurbishment works. We understand that tourism growth and positive consumer sentiment had improved tenant sales by 20.0% in 2013, translating to an improved sales efficiency of S$138 psf at the mall. Within Singapore office space, SGREIT benefited from healthy demand and limited office supply in Orchard Road, hence helping to push the office NPI up by 11.5% YoY (+12.3% reversion in 2013). Together with a 23.2% growth in NPI from SGREIT’s Australia properties, this had outweighed softness in its other overseas assets, which was dragged down by unfavourable forex movements, divestment and increased competition.
Maintain BUY
For the quarter, SGREIT also saw a S$137.5m revaluation gain in its portfolio. As a result, gearing ratio improved by 1.6ppt QoQ to 29.0%, while book value rose by 7.3% QoQ to S$0.92. This implies a 0.82x P/B, the lowest within the local retail space. We maintain BUY on SGREIT, but revise our fair value to S$0.90 from S$0.95 to reflect higher risk-free rate and risk premium assumptions.
Starhill Global REIT (SGREIT) turned in a firm set of 4Q13 results last Friday. NPI rose by 3.4% YoY to S$38.8m due to higher contribution from Singapore properties and Plaza Arcade acquired in 1Q13, while distributable income climbed 9.5% to S$27.2m. DPU was up 8.8% YoY to 1.23 S cents, after retaining S$0.5m (c. 0.02 S cents) for working capital. This brings the FY13 DPU to 5.00 S cents (+13.9%), in line with our annual DPU forecast of 4.95 S cents (consensus: 4.90 S cents). Based on last traded price, DPU yield was at 6.6%, higher than the average yield of 5.7% seen among its domestic retail peers.
Sustained growth in Singapore portfolio
Singapore portfolio continued to deliver good performance, thereby increasing its percentage revenue contribution to 65.5% from 63.0% in 4Q12. Notably, Ngee Ann City retail NPI gained 16.6% YoY amid 6.7% rental uplift from Toshin master lease renewal in 2Q. In addition, Wisma Atria retail NPI saw a 5.0% increase, driven by positive rental reversion of 8.1% in 2013 and ongoing asset repositioning post refurbishment works. We understand that tourism growth and positive consumer sentiment had improved tenant sales by 20.0% in 2013, translating to an improved sales efficiency of S$138 psf at the mall. Within Singapore office space, SGREIT benefited from healthy demand and limited office supply in Orchard Road, hence helping to push the office NPI up by 11.5% YoY (+12.3% reversion in 2013). Together with a 23.2% growth in NPI from SGREIT’s Australia properties, this had outweighed softness in its other overseas assets, which was dragged down by unfavourable forex movements, divestment and increased competition.
Maintain BUY
For the quarter, SGREIT also saw a S$137.5m revaluation gain in its portfolio. As a result, gearing ratio improved by 1.6ppt QoQ to 29.0%, while book value rose by 7.3% QoQ to S$0.92. This implies a 0.82x P/B, the lowest within the local retail space. We maintain BUY on SGREIT, but revise our fair value to S$0.90 from S$0.95 to reflect higher risk-free rate and risk premium assumptions.
Soilbuild Business Space REIT
OCBC on 24 Jan 2014
Soilbuild Business Space REIT’s (Soilbuild REIT) 4Q13 DPU tallied 1.51 S cents, slightly above our DPU projection. We note that the portfolio assets continued to exhibit resilience, thanks to its continued focus on lease management and quality assets. In addition, positive rental reversions of 7.9% were recorded upon lease renewals. Looking ahead, we understand that management will focus on early renewal negotiations for its 2014 lease expiries to ensure that retention rate remains high. As only ~17% of the portfolio NLA is up for renewal in this year, we expect Soilbuild REIT’s operational performance to remain stable. We maintain BUY on Soilbuild REIT with a higher fair value of S$0.85 (S$0.82 previously) after incorporating the better-than-expected results into our forecasts.
Better-than-expected 4Q13 results
Soilbuild Business Space REIT (Soilbuild REIT) turned in a firm set of 4Q13 results this morning. NPI came in at S$13.7m, 2.1% above its prospectus forecast due to higher carpark income and higher contribution from Eightrium and Tuas Connection. The growth was further boosted by lower finance expenses, thereby pushing the distributable income 3.5% above its prospectus forecast at S$12.2m. As such, DPU for the quarter tallied 1.51 S cents, representing a 3.4% increase over its prospectus forecast. This brings the DPU from the period from listing date (16 Aug 2013) to 31 Dec 2013 to 2.27 S cents, slightly above our DPU projection of 2.19 S cents (prospectus forecast: 2.199 S cents).
Continued resilience in portfolio assets
Soilbuild REIT’s portfolio assets continued to exhibit resilience, thanks to its continued focus on lease management and quality assets. We note that overall occupancy has crept up again to 99.9% from 99.8% amid 100% retention on expiring leases since listing and expansion by existing tenants. In addition, positive rental reversions of 7.9% were recorded upon lease renewals. Looking ahead, we understand that management will focus on early renewal negotiations for its 2014 lease expiries to ensure that retention rate remains high. As only ~17% of the portfolio NLA is up for renewal in this year, we expect Soilbuild REIT’s operational performance to remain stable.
Maintain BUY
On the capital management front, management has also increased its interest rate hedge to shield off any volatility on its funding costs. At present, 100% of its interest rate exposure is fixed, as opposed to 75% seen a quarter ago. All-in interest rate, on the other hand, maintained stable at 3.12% (3Q13: 3.11%), while aggregate leverage held steady at 29.3% (3Q13: 29.4%). We now incorporate the better-than-expected results into our forecasts. Accordingly, our fair value rises from S$0.82 to S$0.85. Maintain BUY on Soilbuild REIT.
Soilbuild Business Space REIT (Soilbuild REIT) turned in a firm set of 4Q13 results this morning. NPI came in at S$13.7m, 2.1% above its prospectus forecast due to higher carpark income and higher contribution from Eightrium and Tuas Connection. The growth was further boosted by lower finance expenses, thereby pushing the distributable income 3.5% above its prospectus forecast at S$12.2m. As such, DPU for the quarter tallied 1.51 S cents, representing a 3.4% increase over its prospectus forecast. This brings the DPU from the period from listing date (16 Aug 2013) to 31 Dec 2013 to 2.27 S cents, slightly above our DPU projection of 2.19 S cents (prospectus forecast: 2.199 S cents).
Continued resilience in portfolio assets
Soilbuild REIT’s portfolio assets continued to exhibit resilience, thanks to its continued focus on lease management and quality assets. We note that overall occupancy has crept up again to 99.9% from 99.8% amid 100% retention on expiring leases since listing and expansion by existing tenants. In addition, positive rental reversions of 7.9% were recorded upon lease renewals. Looking ahead, we understand that management will focus on early renewal negotiations for its 2014 lease expiries to ensure that retention rate remains high. As only ~17% of the portfolio NLA is up for renewal in this year, we expect Soilbuild REIT’s operational performance to remain stable.
Maintain BUY
On the capital management front, management has also increased its interest rate hedge to shield off any volatility on its funding costs. At present, 100% of its interest rate exposure is fixed, as opposed to 75% seen a quarter ago. All-in interest rate, on the other hand, maintained stable at 3.12% (3Q13: 3.11%), while aggregate leverage held steady at 29.3% (3Q13: 29.4%). We now incorporate the better-than-expected results into our forecasts. Accordingly, our fair value rises from S$0.82 to S$0.85. Maintain BUY on Soilbuild REIT.
CapitaCommercial Trust
OCBC on 24 Jan 2014
4Q13 distributable income increased 3.3% YoY to S$60.2m. This cumulates to a distributable income of S$234.2m for FY13, which is up 2.5% YoY mainly due to higher revenue contributions across portfolio properties and a full-year contribution from Twenty Anson. FY13 distributable income constitutes 102.1% of our annual forecast and we deem this this performance to be within expectations. The group reported 4Q13 DPU at 2.09 S-cents, adding up to a total FY13 DPU of 8.14 S-cents – a 5.6% distribution yield based on the traded price of S$1.45 per unit. We continue to like CCT for its exposure to the relatively attractive CBD sub-market. With its low gearing of 29.3% and debt headroom of S$1.2b (to 40% gearing), there is significant dry powder for accretive acquisitions. Maintain BUY with an unchanged fair value estimate of S$1.61.
FY13 figures within expectations
4Q13 distributable income increased 3.3% YoY to S$60.2m. This cumulates to a distributable income of S$234.2m for FY13, which is up 2.5% YoY mainly due to higher revenue contributions across portfolio properties and a full-year contribution from Twenty Anson. FY13 distributable income constitutes 102.1% of our annual forecast and we deem this this performance to be within expectations. The group reported 4Q13 DPU at 2.09 S-cents, adding up to a total FY13 DPU of 8.14 S-cents – a 5.6% distribution yield based on the traded price of S$1.45 per unit.
Poised to benefit from recovering CBD office market
Portfolio occupancy came up to 98.7% as of end 4Q13 versus 97.2% a year ago. In particular, we highlight that management has successfully addressed the issue of weak occupancies in Capital Tower and One George Street over FY13, bringing the occupancy rate up from 90.6% and 94.4% as at end FY12 to current levels of 100% and 99.5%, respectively. As a result of continued rental reversions, CCT’s average committed office portfolio rentals increased over the year from S$7.64 (end FY12) to S$8.13 (end FY13). Finally, greenfield-asset CapitaGreen remains on track to attain TOP by end FY14; recall that this is the only asset completing in the core CDB sub-market over FY14-15. The group also completed its S$86m enhancement program at Six Battery Road, resulting in an estimated 8.6% ROI from incremental rentals and savings in operating expenses.
Significant dry powder – debt headroom of S$1.2b
We continue to like CCT for its exposure to the relatively attractive CBD sub-market. With its low gearing of 29.3% and debt headroom of S$1.2b (to 40% gearing), there is significant dry powder for accretive acquisitions. We believe this puts CCT in an advantageous position to capitalize on the sector, particularly if the recovery should surprise on the upside given its valuable call option to purchase the remaining 60% of CapitaGreen within three years after TOP. Maintain BUY with an unchanged fair value estimate of S$1.61.
4Q13 distributable income increased 3.3% YoY to S$60.2m. This cumulates to a distributable income of S$234.2m for FY13, which is up 2.5% YoY mainly due to higher revenue contributions across portfolio properties and a full-year contribution from Twenty Anson. FY13 distributable income constitutes 102.1% of our annual forecast and we deem this this performance to be within expectations. The group reported 4Q13 DPU at 2.09 S-cents, adding up to a total FY13 DPU of 8.14 S-cents – a 5.6% distribution yield based on the traded price of S$1.45 per unit.
Poised to benefit from recovering CBD office market
Portfolio occupancy came up to 98.7% as of end 4Q13 versus 97.2% a year ago. In particular, we highlight that management has successfully addressed the issue of weak occupancies in Capital Tower and One George Street over FY13, bringing the occupancy rate up from 90.6% and 94.4% as at end FY12 to current levels of 100% and 99.5%, respectively. As a result of continued rental reversions, CCT’s average committed office portfolio rentals increased over the year from S$7.64 (end FY12) to S$8.13 (end FY13). Finally, greenfield-asset CapitaGreen remains on track to attain TOP by end FY14; recall that this is the only asset completing in the core CDB sub-market over FY14-15. The group also completed its S$86m enhancement program at Six Battery Road, resulting in an estimated 8.6% ROI from incremental rentals and savings in operating expenses.
Significant dry powder – debt headroom of S$1.2b
We continue to like CCT for its exposure to the relatively attractive CBD sub-market. With its low gearing of 29.3% and debt headroom of S$1.2b (to 40% gearing), there is significant dry powder for accretive acquisitions. We believe this puts CCT in an advantageous position to capitalize on the sector, particularly if the recovery should surprise on the upside given its valuable call option to purchase the remaining 60% of CapitaGreen within three years after TOP. Maintain BUY with an unchanged fair value estimate of S$1.61.
Keppel Corp
OCBC on 24 Jan 2014
Keppel Corporation (KEP) reported a set of disappointing FY13 results last night, with core earnings falling 26% to S$1.41b, or around 7% below ours and the street’s forecast; this mainly due to larger-than-expected provisions for its Infrastructure business. Going forward, KEP maintains a fairly cautiously upbeat outlook, especially for its main O&M business. We also believe that KEP should just stay ahead of the pack with its Near Market, Near Customer strategy. Maintain BUY with a slightly lower SOTP-based fair value of S$12.25 (versus S$12.87) due to lower market values of its listed units.
FY13 earnings 7% below forecast
Keppel Corporation (KEP) reported a set of disappointing FY13 results last night. Full-year revenue slipped 11% to S$12.38b, mainly due to a sharp 41% fall in its property sales to S$1.77b (absence of revenue recognition from sales of Reflections at Keppel Bay in FY13); but the figure was still just ahead of our forecast of S$11.83b and the street’s S$12.18b estimate. However, due to a larger-than-expected loss (mainly due to prolongation provisions) at its Infrastructure division, reported net profit slipped 18% to S$1.85b. And if we exclude exceptional gains, core earnings would have fallen 26% to S$1.41b, or about 7% below ours and the street’s S$1.51b forecast. KEP has declared a final dividend of S$0.30/share, bringing its full-year payout to S$0.495 (which includes interim dividend of S$0.10 and dividend-in-specie of K-REIT shares worth S$0.095).
Outlook remains cautiously upbeat
Going forward, KEP maintains a fairly cautiously upbeat outlook, especially for its main O&M business. Management notes that the division has won about S$2.1b worth of new orders (including seven jackups and three FPSOs conversion/upgrades in 4Q13), bringing its total order book to S$14.2b and visibility extending into 2019. Citing the positive global energy outlook, KEP expects the global E&P capex to continue to rise, with >US$223b of deepwater investments likely to be made over 2013-2017. As for its Infrastructure business, management notes that it is doing its best to complete those projects in the UK and Qatar, both within the timeline and present cost forecast. KEP is also scaling up the data centre business, and is exploring a data centre business trust.
Maintain BUY with lower S$12.25 fair value
Despite signs of competition increasing in the O&M sector, we believe that KEP should just stay ahead of the pack with its Near Market, Near Customer strategy. Maintain BUY with a slightly lower SOTP-based fair value of S$12.25 (versus S$12.87) due to lower market values of its listed units.
Keppel Corporation (KEP) reported a set of disappointing FY13 results last night. Full-year revenue slipped 11% to S$12.38b, mainly due to a sharp 41% fall in its property sales to S$1.77b (absence of revenue recognition from sales of Reflections at Keppel Bay in FY13); but the figure was still just ahead of our forecast of S$11.83b and the street’s S$12.18b estimate. However, due to a larger-than-expected loss (mainly due to prolongation provisions) at its Infrastructure division, reported net profit slipped 18% to S$1.85b. And if we exclude exceptional gains, core earnings would have fallen 26% to S$1.41b, or about 7% below ours and the street’s S$1.51b forecast. KEP has declared a final dividend of S$0.30/share, bringing its full-year payout to S$0.495 (which includes interim dividend of S$0.10 and dividend-in-specie of K-REIT shares worth S$0.095).
Outlook remains cautiously upbeat
Going forward, KEP maintains a fairly cautiously upbeat outlook, especially for its main O&M business. Management notes that the division has won about S$2.1b worth of new orders (including seven jackups and three FPSOs conversion/upgrades in 4Q13), bringing its total order book to S$14.2b and visibility extending into 2019. Citing the positive global energy outlook, KEP expects the global E&P capex to continue to rise, with >US$223b of deepwater investments likely to be made over 2013-2017. As for its Infrastructure business, management notes that it is doing its best to complete those projects in the UK and Qatar, both within the timeline and present cost forecast. KEP is also scaling up the data centre business, and is exploring a data centre business trust.
Maintain BUY with lower S$12.25 fair value
Despite signs of competition increasing in the O&M sector, we believe that KEP should just stay ahead of the pack with its Near Market, Near Customer strategy. Maintain BUY with a slightly lower SOTP-based fair value of S$12.25 (versus S$12.87) due to lower market values of its listed units.
TigerAir
OCBC on 24 Jan 2014
Tiger Airways Holdings (TR) recorded a shocking S$118.5m net loss, including S$88.3m in exceptional charges, for 3QFY14; net profit a year ago was S$2.0m. The exceptional charges comprise a S$30.3m loss on the planned disposal of Tigerair Philippines (TRP) and an impairment of associates of S$58.0m (this latter number excludes TRP). TR also clocked S$23.1m as its share of losses of associates. While Tigerair Singapore (TRS) saw an increase in traffic volume of 9.2% YoY, its revenue fell by 2.9% to S$168.0m. Yield had contracted 11.3% and load factor declined by 9.8 ppt to 75.8%. Management states the TRS continues to face short-term pressure on yield and load factors in the current seasonally weaker quarter given the industry’s overcapacity situation. TR’s NAV fell from S$0.51 as of end-Sep to S$0.39 as of end-Dec. Adjusting our estimates, we cut our FV estimate from S$0.55 to S$0.42 (1.1x FY14F P/B) and downgrade TR from Hold to SELL. We expect strong pressure on the share price following these disappointing results.
Associates cause major loss
3QFY14 revenue for Tiger Airways Holdings (TR) declined 30.5% YoY to S$172.1m due to the absence of Tigerair Australia (partially disposed), and a fall in revenue for Tigerair Singapore (TRS). The partial disposal of TRA meant lower expenses of S$180.9m, down 21.3% YoY, partially offset by TRS’ higher cost. TR recorded a shocking S$118.5m net loss, including S$88.3m in exceptional charges, for 3QFY14; net profit a year ago was S$2.0m. The exceptional charges comprise a S$30.3m loss on the planned disposal of Tigerair Philippines (TRP) and an impairment of associates of S$58.0m (this latter number excludes TRP). TR also clocked S$23.1m as its share of losses of associates. TR’s share of losses in Tigerair Mandala, TRA and TRP were S$11.2m, S$7.4m and S$4.5m respectively. The divestment of TRP is expected to be completed in 4QFY14 and additional losses relating to TRP are not expected.
TRS to face more near-term pressure
While TRS saw an increase in traffic volume of 9.2% YoY, its revenue fell by 2.9% to S$168.0m. Yield had contracted 11.3% and load factor declined by 9.8 ppt to 75.8%. Unit cost increased by 2.8% as growth in expenses (+26.8%) was greater than that of capacity (+23.3%). Cost increase for TRS was mainly due to increase in capacity and larger fleet size. TRS registered an operating loss of S$17.0m versus an operating profit of S$27.0m a year ago. Management states that TRS continues to face short-term pressure on yield and load factors in the current seasonally weaker quarter given the industry’s overcapacity situation. TRS will be taking delivery of one more Airbus A320 within the financial year and will also be absorbing two Airbus A319s from TRP’s fleet following the divestment of the associate airline.
Cut FV to S$0.42
We cut our FV estimate from S$0.55 to S$0.42 (1.1x FY14F P/B) and downgrade TR from Hold to SELL. We expect strong pressure on the share price following these disappointing results.
3QFY14 revenue for Tiger Airways Holdings (TR) declined 30.5% YoY to S$172.1m due to the absence of Tigerair Australia (partially disposed), and a fall in revenue for Tigerair Singapore (TRS). The partial disposal of TRA meant lower expenses of S$180.9m, down 21.3% YoY, partially offset by TRS’ higher cost. TR recorded a shocking S$118.5m net loss, including S$88.3m in exceptional charges, for 3QFY14; net profit a year ago was S$2.0m. The exceptional charges comprise a S$30.3m loss on the planned disposal of Tigerair Philippines (TRP) and an impairment of associates of S$58.0m (this latter number excludes TRP). TR also clocked S$23.1m as its share of losses of associates. TR’s share of losses in Tigerair Mandala, TRA and TRP were S$11.2m, S$7.4m and S$4.5m respectively. The divestment of TRP is expected to be completed in 4QFY14 and additional losses relating to TRP are not expected.
TRS to face more near-term pressure
While TRS saw an increase in traffic volume of 9.2% YoY, its revenue fell by 2.9% to S$168.0m. Yield had contracted 11.3% and load factor declined by 9.8 ppt to 75.8%. Unit cost increased by 2.8% as growth in expenses (+26.8%) was greater than that of capacity (+23.3%). Cost increase for TRS was mainly due to increase in capacity and larger fleet size. TRS registered an operating loss of S$17.0m versus an operating profit of S$27.0m a year ago. Management states that TRS continues to face short-term pressure on yield and load factors in the current seasonally weaker quarter given the industry’s overcapacity situation. TRS will be taking delivery of one more Airbus A320 within the financial year and will also be absorbing two Airbus A319s from TRP’s fleet following the divestment of the associate airline.
Cut FV to S$0.42
We cut our FV estimate from S$0.55 to S$0.42 (1.1x FY14F P/B) and downgrade TR from Hold to SELL. We expect strong pressure on the share price following these disappointing results.
Suntec Reit
OCBC on 24 Jan 2014
Suntec REIT’s 4Q13 results exceeded both market and our expectations. Going forward, we understand that management will continue to focus on forward renewal of its office leases. With only 12.5% of its office leases due to expire in 2014, we believe the office segment will remain robust. Suntec REIT also updated that Phase 2 AEI is on track for completion in 1Q14, and that pre-commitment for the retail space has reached 97.0%, up from 83.7% in 3Q. While bottomline may experience a dip in 1Q as Phase 3 tenants vacate for the last phase of AEI, we continue to be overall positive on its longer-term potential, arising from 1) strong rental uplift at Suntec City, 2) earnings accretion from 177-199 Pacific Highway acquisition and 3) potential interest savings post refinancing of its S$773.5m club loan due in 2014. We maintain BUY with unchanged fair value of S$1.90 on Suntec REIT.
Significant recovery post Phase 1 AEI
Suntec REIT’s 4Q13 results exceeded both market and our expectations. NPI came in at S$49.8m, representing a 62.9% jump YoY, due to the opening of Phase 1 retail space of Suntec City Mall (SCM) and Suntec Singapore post AEI. Distributable income from operations also saw a 3.4% increase YoY to S$54.2m. Amid the recovery in performance, management utilized a smaller amount of S$4.0m from CHIJMES sale proceeds for capital distribution (3Q13: S$4.5m, FY13: S$19.0m). Nevertheless, this helped to boost the quarterly DPU up by 10.1% YoY to 2.562 S cents. As such, FY13 DPU amounted to 9.328 S cents, just a tad lower than FY12 DPU of 9.49 S cents but ahead of both ours and consensus forecast of 9.1 S cents.
Continued improvement in operational metrics
Contribution from the retail segment continued to climb, reaching 39% of gross revenue in 4Q13 versus 34% seen a quarter ago. However, the retail revenue was still 10.2% lower YoY due to the ongoing AEI of Phase 2 SCM. Suntec Singapore, we note, contributed S$18.2m from just S$0.5m in 4Q12. In addition, office segment registered a sustained growth of 3.8% YoY due to positive rental reversions, consistent with our positive view on the office market. Notably, rental rate for leases secured at Suntec City Office again improved QoQ at S$8.65 psf pm (3Q: S$8.55). Going forward, we understand that management will continue to focus on forward renewal of its office leases. With only 12.5% of its office leases due to expire in 2014, we thus believe the office segment will remain robust.
Maintain BUY
Suntec REIT also updated that Phase 2 AEI is on track for completion in 1Q14, and that pre-commitment for the retail space has reached 97.0%, up from 83.7% in 3Q. While bottomline may experience a dip in 1Q as Phase 3 tenants vacate for the last phase of AEI, we continue to be overall positive on its longer-term potential, arising from 1) strong rental uplift at Suntec City, 2) earnings accretion from 177-199 Pacific Highway acquisition and 3) potential interest savings post refinancing of its S$773.5m club loan due in 2014. We maintain BUY with unchanged fair value of S$1.90 on Suntec REIT.
Suntec REIT’s 4Q13 results exceeded both market and our expectations. NPI came in at S$49.8m, representing a 62.9% jump YoY, due to the opening of Phase 1 retail space of Suntec City Mall (SCM) and Suntec Singapore post AEI. Distributable income from operations also saw a 3.4% increase YoY to S$54.2m. Amid the recovery in performance, management utilized a smaller amount of S$4.0m from CHIJMES sale proceeds for capital distribution (3Q13: S$4.5m, FY13: S$19.0m). Nevertheless, this helped to boost the quarterly DPU up by 10.1% YoY to 2.562 S cents. As such, FY13 DPU amounted to 9.328 S cents, just a tad lower than FY12 DPU of 9.49 S cents but ahead of both ours and consensus forecast of 9.1 S cents.
Continued improvement in operational metrics
Contribution from the retail segment continued to climb, reaching 39% of gross revenue in 4Q13 versus 34% seen a quarter ago. However, the retail revenue was still 10.2% lower YoY due to the ongoing AEI of Phase 2 SCM. Suntec Singapore, we note, contributed S$18.2m from just S$0.5m in 4Q12. In addition, office segment registered a sustained growth of 3.8% YoY due to positive rental reversions, consistent with our positive view on the office market. Notably, rental rate for leases secured at Suntec City Office again improved QoQ at S$8.65 psf pm (3Q: S$8.55). Going forward, we understand that management will continue to focus on forward renewal of its office leases. With only 12.5% of its office leases due to expire in 2014, we thus believe the office segment will remain robust.
Maintain BUY
Suntec REIT also updated that Phase 2 AEI is on track for completion in 1Q14, and that pre-commitment for the retail space has reached 97.0%, up from 83.7% in 3Q. While bottomline may experience a dip in 1Q as Phase 3 tenants vacate for the last phase of AEI, we continue to be overall positive on its longer-term potential, arising from 1) strong rental uplift at Suntec City, 2) earnings accretion from 177-199 Pacific Highway acquisition and 3) potential interest savings post refinancing of its S$773.5m club loan due in 2014. We maintain BUY with unchanged fair value of S$1.90 on Suntec REIT.
Friday, 24 January 2014
Keppel Land
OCBC on 23 Jan 2014
KPLD reported 4Q13 PATMI of S$567.3m, up 7.6% YoY mostly due to a S$151.8m divestment gain from the sale of Jakarta Garden City and Hotel Sedona Manado, Indonesia. FY13 PATMI now cumulates to S$885.9m; excluding the effects of one-time items, we judge this to be in line with expectations. KPLD sold 370 residential units in Singapore over FY13, down 14%, and we expect another muted year ahead with the bulk of sales likely coming from its Tiong Bahru project (to be launched in 1H14). In China, the group sold an impressive 3.9k units, up 135% over FY12. Though we note 4Q13 sales dipped 30% QoQ to 800 units, management indicated that they continue to see fairly solid housing fundamentals on the ground. The group proposed a final dividend of 13 S-cents. Maintain BUY with an unchanged fair value estimate of S$4.09 (30% RNAV disc.).
Boost from sales of Indonesian assets
KPLD reported 4Q13 PATMI of S$567.3m, up 7.6% YoY, mostly due to a S$151.8m divestment gain from the sale of Jakarta Garden City and Hotel Sedona Manado, Indonesia, and partially offset by lower fair value gains on investment assets. FY13 PATMI now cumulates to S$885.9m; excluding the effects of one-time items, we judge this to be in line with expectations. In terms of the top line, KPLD booked S$505.7m of revenues in 4Q13. This increased 7.2% YoY as heavier progress recognition rolled in from Lakefront Residences and The Luxurie in Singapore as well as Riviera Cove in Vietnam. The group also proposed a final dividend of 13 S-cents.
Expect Tiong Bahru Site launch in 1H14
The group sold 370 residential units in Singapore over FY13, mostly derived from Corals at Keppel Bay and The Glades, and is down 14%. We expect another muted year in Singapore, given the uncertain residential outlook currently, and the bulk of KPLD’s FY14 sales would likely come from its 500-unit Tiong Bahru project (to be launched in 1H14). MBFC Tower 3 is now 95% committed with an average WALE of eight years. We understand that management is comfortable with conditions in the CBD office market currently, and would be willing to divest and recycle capital when the right offer comes along.
Impressive rate of sales in China
In FY13, the group sold an impressive 3.9k units in China, up 135% over FY12, mostly from The Botanica (Chengdu), The Springdale and Seasons Residence in Shanghai and Stamford City (Jiangyin). Though we note that sales in 4Q13 dipped 30% QoQ to 800 units, management indicated that they continue to see fairly solid housing fundamentals on the ground.
Maintain BUY with unchanged S$4.09 FV
We continue to like KPLD for its compelling valuation and its strong balance sheet with S$1.3b in cash and 38% net gearing. Maintain BUY with an unchanged fair value estimate of S$4.09 (30% discount to RNAV).
KPLD reported 4Q13 PATMI of S$567.3m, up 7.6% YoY, mostly due to a S$151.8m divestment gain from the sale of Jakarta Garden City and Hotel Sedona Manado, Indonesia, and partially offset by lower fair value gains on investment assets. FY13 PATMI now cumulates to S$885.9m; excluding the effects of one-time items, we judge this to be in line with expectations. In terms of the top line, KPLD booked S$505.7m of revenues in 4Q13. This increased 7.2% YoY as heavier progress recognition rolled in from Lakefront Residences and The Luxurie in Singapore as well as Riviera Cove in Vietnam. The group also proposed a final dividend of 13 S-cents.
Expect Tiong Bahru Site launch in 1H14
The group sold 370 residential units in Singapore over FY13, mostly derived from Corals at Keppel Bay and The Glades, and is down 14%. We expect another muted year in Singapore, given the uncertain residential outlook currently, and the bulk of KPLD’s FY14 sales would likely come from its 500-unit Tiong Bahru project (to be launched in 1H14). MBFC Tower 3 is now 95% committed with an average WALE of eight years. We understand that management is comfortable with conditions in the CBD office market currently, and would be willing to divest and recycle capital when the right offer comes along.
Impressive rate of sales in China
In FY13, the group sold an impressive 3.9k units in China, up 135% over FY12, mostly from The Botanica (Chengdu), The Springdale and Seasons Residence in Shanghai and Stamford City (Jiangyin). Though we note that sales in 4Q13 dipped 30% QoQ to 800 units, management indicated that they continue to see fairly solid housing fundamentals on the ground.
Maintain BUY with unchanged S$4.09 FV
We continue to like KPLD for its compelling valuation and its strong balance sheet with S$1.3b in cash and 38% net gearing. Maintain BUY with an unchanged fair value estimate of S$4.09 (30% discount to RNAV).
Singapore Exchange
OCBC on 23 Jan 2014
Singapore Exchange (SGX) reported 2QFY14 net earnings of S$75.0m, higher than market consensus of S$71m based on Bloomberg. Securities Revenue was at recent historical quarterly low, and this led to the lowest group net profit in the last five quarters. Its overall performance was lifted by higher Derivatives Revenue, up 15.9% YoY or 1.5% QoQ to S$52.5m. Derivatives Revenue is now on par with Securities Revenue. We expect 3QFY14 to remain challenging for its Securities business. Among some of the key concerns is our expectation of weaker property data ahead and this could curtail trading interest in property and property-related stocks in the quarter. We have cut our FY14 net earnings and our fair value estimate to S$7.22, putting both near the lowest end of street estimates. Dividend yield is 4% at current price. Maintain HOLD.
2QFY14 earnings above consensus
Singapore Exchange (SGX) delivered 2QFY14 net earnings of S$75.0m, down 1.8% YoY and 18.8% QoQ. This is higher than market consensus of S$71m based on Bloomberg. While the softness in its Securities business was widely expected based on trading activities and market conditions (down 12.7% YoY and 24.3% QoQ to S$52.2m), SGX’s overall performance was lifted by higher Derivatives Revenue, up 15.9% YoY or 1.5% QoQ to S$52.5m. Derivatives Revenue is now on par with Securities Revenue. An interim base dividend of 4 cents has been declared.
Derivatives mitigated softness from Securities
2QFY14 was the lowest net profit in the last five quarters, largely brought on by the lowest Securities Revenue in recent history. Its overall performance was aided by higher Derivatives Revenue, which experienced revenue growth from most key contracts as the total number of traded contracts grew 18% YoY to 26.3m in 2QFY14. In particular, the Japan Nikkei 225 futures (+11%), China A50 futures (+55%), Nikkei 225 options (+57%) and the Ire Ore swaps (+64%) did well in the quarter.
Challenging quarter ahead; cut FV to S$7.22
We expect 3QFY14 to be no less challenging than the previous quarter for its Securities business. Among some of the key concerns is our expectation of weaker property data ahead and this could curtail trading interest in property and property-related stocks in the quarter. We have adjusted our estimates and cut our FY14 projected net earnings to S$336.1m, at the lower end of the market range. We have also cut our fair value estimate from S$7.43 to S$7.22 to reflect reduced near term share price drivers. This also puts our fair valuation near the lowest end of street estimates. However, we expect the 28 cents dividend payout to be maintained, giving a yield of 4% at current price. We are maintaining our HOLD rating.
Singapore Exchange (SGX) delivered 2QFY14 net earnings of S$75.0m, down 1.8% YoY and 18.8% QoQ. This is higher than market consensus of S$71m based on Bloomberg. While the softness in its Securities business was widely expected based on trading activities and market conditions (down 12.7% YoY and 24.3% QoQ to S$52.2m), SGX’s overall performance was lifted by higher Derivatives Revenue, up 15.9% YoY or 1.5% QoQ to S$52.5m. Derivatives Revenue is now on par with Securities Revenue. An interim base dividend of 4 cents has been declared.
Derivatives mitigated softness from Securities
2QFY14 was the lowest net profit in the last five quarters, largely brought on by the lowest Securities Revenue in recent history. Its overall performance was aided by higher Derivatives Revenue, which experienced revenue growth from most key contracts as the total number of traded contracts grew 18% YoY to 26.3m in 2QFY14. In particular, the Japan Nikkei 225 futures (+11%), China A50 futures (+55%), Nikkei 225 options (+57%) and the Ire Ore swaps (+64%) did well in the quarter.
Challenging quarter ahead; cut FV to S$7.22
We expect 3QFY14 to be no less challenging than the previous quarter for its Securities business. Among some of the key concerns is our expectation of weaker property data ahead and this could curtail trading interest in property and property-related stocks in the quarter. We have adjusted our estimates and cut our FY14 projected net earnings to S$336.1m, at the lower end of the market range. We have also cut our fair value estimate from S$7.43 to S$7.22 to reflect reduced near term share price drivers. This also puts our fair valuation near the lowest end of street estimates. However, we expect the 28 cents dividend payout to be maintained, giving a yield of 4% at current price. We are maintaining our HOLD rating.
Frasers Commercial Trust
OCBC on 23 Jan 2014
Frasers Commercial Trust’s (FCOT) 1QFY14 DPU of 2.05 S cents (+29.7% YoY) was within our expectations. China Square Central and 55 Market Street were the key performers for 1Q, raking up NPI growth of 15.4% and 9.6% respectively on the back of higher secured rental and occupancy rates. Domestic leasing demand also remained relatively buoyant in our view, as positive rental reversions ranging from 10.7% to 20.7% were achieved during the quarter. Looking ahead, management continues to maintain its positive tone, highlighting that its under-rented portfolio assets and current occupancy rate provide room for further income growth. At Alexandra Technopark, we note that FCOT is currently receiving S$1.80 psf pm net rent for the master lease (vs. S$3.40 gross rent for underlying leases). Given that the master lease makes up a significant 21.7% of FCOT’s rental income, we are thus positive on its performance in FY14. Maintain BUY with unchanged fair value of S$1.45 on FCOT.
1QFY14 results met expectations
Frasers Commercial Trust (FCOT) delivered 1QFY14 NPI of S$22.1m, down 3.5% YoY due to a weaker AUD, lower occupancy at Central Park and absence of contribution from its divested Japan properties. However, the softer NPI was more than offset by a realized gain from its cashflow hedges, lower interest expenses and savings in the convertible perpetual preferred unit (CPPU) distribution following the net conversion/redemption of the CPPUs. As such, distributable income to unitholders jumped 33.4% YoY to S$13.7m, while DPU climbed 29.7% to 2.05 S cents. This falls within market expectations, as the quarterly DPU constitutes 22.9%/23.3% of our/consensus full-year DPU projections.
Portfolio continued to exhibit resilience
China Square Central (CSC) and 55 Market Street were the key performers for 1Q, raking up NPI growth of 15.4% and 9.6% respectively on the back of higher secured rental and occupancy rates. As a result, Singapore portfolio contributed 50% of FCOT’s NPI, up from 47% in the prior quarter. Domestic leasing demand remained relatively buoyant in our view, as positive rental reversions ranging from 10.7% to 20.7% were achieved during the quarter. On the portfolio front, occupancy rate was also stable at 97.1% (4QFY13: 97.9%), while weighted average lease to expiry was largely unchanged at 4.4 years (4QFY13: 4.6 years).
Maintain BUY
Looking ahead, management continues to maintain its positive tone, highlighting that its under-rented portfolio assets and current occupancy rate provide room for further income growth. Specifically, FCOT shared that the opening of the Downtown Line nearby CSC is expected to improve its connectivity and boost its attractiveness. At Alexandra Technopark, we also note that FCOT is currently receiving S$1.80 psf pm net rent for the master lease (vs. S$3.40 gross rent for underlying leases), and is well positioned for rental uplift upon the lease expiry in Aug. Given that the master lease makes up a significant 21.7% of FCOT’s rental income and strong execution by management, we are thus positive on its performance in FY14. MaintainBUY with unchanged fair value of S$1.45 on FCOT.
Frasers Commercial Trust (FCOT) delivered 1QFY14 NPI of S$22.1m, down 3.5% YoY due to a weaker AUD, lower occupancy at Central Park and absence of contribution from its divested Japan properties. However, the softer NPI was more than offset by a realized gain from its cashflow hedges, lower interest expenses and savings in the convertible perpetual preferred unit (CPPU) distribution following the net conversion/redemption of the CPPUs. As such, distributable income to unitholders jumped 33.4% YoY to S$13.7m, while DPU climbed 29.7% to 2.05 S cents. This falls within market expectations, as the quarterly DPU constitutes 22.9%/23.3% of our/consensus full-year DPU projections.
Portfolio continued to exhibit resilience
China Square Central (CSC) and 55 Market Street were the key performers for 1Q, raking up NPI growth of 15.4% and 9.6% respectively on the back of higher secured rental and occupancy rates. As a result, Singapore portfolio contributed 50% of FCOT’s NPI, up from 47% in the prior quarter. Domestic leasing demand remained relatively buoyant in our view, as positive rental reversions ranging from 10.7% to 20.7% were achieved during the quarter. On the portfolio front, occupancy rate was also stable at 97.1% (4QFY13: 97.9%), while weighted average lease to expiry was largely unchanged at 4.4 years (4QFY13: 4.6 years).
Maintain BUY
Looking ahead, management continues to maintain its positive tone, highlighting that its under-rented portfolio assets and current occupancy rate provide room for further income growth. Specifically, FCOT shared that the opening of the Downtown Line nearby CSC is expected to improve its connectivity and boost its attractiveness. At Alexandra Technopark, we also note that FCOT is currently receiving S$1.80 psf pm net rent for the master lease (vs. S$3.40 gross rent for underlying leases), and is well positioned for rental uplift upon the lease expiry in Aug. Given that the master lease makes up a significant 21.7% of FCOT’s rental income and strong execution by management, we are thus positive on its performance in FY14. MaintainBUY with unchanged fair value of S$1.45 on FCOT.
CapitaMall Trust
OCBC on 23 Jan 2014
CapitaMall Trust (CMT) yesterday reported 4Q13 DPU of 10.27 S cents (+8.6%, in line with our expectations. As at 31 Dec 2013, portfolio occupancy remained relatively stable at 98.5%. For the year, tenant sales psf increased by 2.5%, while shopper traffic grew 3.1%. Going forward, we believe shopper traffic may improve further at several of CMT’s malls, which should sustain the leasing demand currently seen in its portfolio. We also understand that CMT will be embarking on AEI for Tampines Mall and Phase 2 of Bugis Junction in 1Q14. On 3 Jan, CMT has granted options to a consortium to purchase Westgate Tower for S$579.4m. If the sale materializes, the progressive payments made for the office building will provide CMT with additional resources for its growth plans. We maintain BUY on CMT but revise our fair value from S$2.35 to S$2.20 to reflect higher cost of equity assumptions.
Ending FY13 on positive note
CapitaMall Trust (CMT) yesterday reported 4Q13 NPI of S$125.5m and distributable income of S$94.4m, up 11.1% and 18.3% YoY respectively. The strong performance was bolstered by The Atrium@Orchard and IMM Building post asset enhancement initiatives (AEIs) and higher secured rentals on lease renewals. DPU came in at 2.72 S cents, representing an increase of 15.3% YoY. For FY13, DPU amounted to 10.27 S cents, up 8.6%.This is in line with both ours and consensus full-year DPU forecast of 10.1 S cents.
Positive operational performance
As at 31 Dec 2013, portfolio occupancy remained relatively stable at 98.5% as compared to 99.5% seen a quarter ago. The slight decline, we note, was mainly due to the inclusion of Westgate mall, which opened on 2 Dec 2013 with a committed occupancy of 85.8%. For the year, operational performance was largely positive, as evidenced by the positive rental reversion of 6.3% achieved for the 629 new leases/renewals. Moreover, tenant sales psf also increased by 2.5%, while shopper traffic grew 3.1%.
Maintain BUY
Going forward, we believe shopper traffic may improve further at several of CMT’s malls (especially those after completion of development/AEIs), which should sustain the leasing demand currently seen in its portfolio. Management shared that it is seeing a trend of retailers taking up smaller space and that it has tailoring the mall space to make it accessible for them. We think this is positive for CMT as it may command higher rental rates on a psf basis. We also understand that CMT will be embarking on AEI for Tampines Mall and Phase 2 of Bugis Junction to optimise its floor area and yield in 1Q14. On 3 Jan, CMT has granted options to a consortium to purchase Westgate Tower for S$579.4m (up to 24 Jan to exercise options). If the sale materializes, the progressive payments made for the office building will provide CMT with additional resources for its growth plans. We maintain BUY on CMT but revise our fair value from S$2.35 to S$2.20 to reflect higher cost of equity assumptions.
CapitaMall Trust (CMT) yesterday reported 4Q13 NPI of S$125.5m and distributable income of S$94.4m, up 11.1% and 18.3% YoY respectively. The strong performance was bolstered by The Atrium@Orchard and IMM Building post asset enhancement initiatives (AEIs) and higher secured rentals on lease renewals. DPU came in at 2.72 S cents, representing an increase of 15.3% YoY. For FY13, DPU amounted to 10.27 S cents, up 8.6%.This is in line with both ours and consensus full-year DPU forecast of 10.1 S cents.
Positive operational performance
As at 31 Dec 2013, portfolio occupancy remained relatively stable at 98.5% as compared to 99.5% seen a quarter ago. The slight decline, we note, was mainly due to the inclusion of Westgate mall, which opened on 2 Dec 2013 with a committed occupancy of 85.8%. For the year, operational performance was largely positive, as evidenced by the positive rental reversion of 6.3% achieved for the 629 new leases/renewals. Moreover, tenant sales psf also increased by 2.5%, while shopper traffic grew 3.1%.
Maintain BUY
Going forward, we believe shopper traffic may improve further at several of CMT’s malls (especially those after completion of development/AEIs), which should sustain the leasing demand currently seen in its portfolio. Management shared that it is seeing a trend of retailers taking up smaller space and that it has tailoring the mall space to make it accessible for them. We think this is positive for CMT as it may command higher rental rates on a psf basis. We also understand that CMT will be embarking on AEI for Tampines Mall and Phase 2 of Bugis Junction to optimise its floor area and yield in 1Q14. On 3 Jan, CMT has granted options to a consortium to purchase Westgate Tower for S$579.4m (up to 24 Jan to exercise options). If the sale materializes, the progressive payments made for the office building will provide CMT with additional resources for its growth plans. We maintain BUY on CMT but revise our fair value from S$2.35 to S$2.20 to reflect higher cost of equity assumptions.
Raffles Medical Group
OCBC on 23 Jan 2014
Raffles Medical Group (RMG) has agreed to acquire a land site adjacent to its Raffles Hospital from the Singapore Land Authority for S$105.2m. It will be able to boost its total hospital GFA by 72% to 49,217.28 sqm upon completion, which is expected in FY16. This will allow RMG to expand its range of sub-specialty centres and its healthcare education and clinical research activities, which we view positively. Together with a recent Holland Village property purchase and development project, total capex is estimated to amount to S$430m, which RMG expects to finance with internal resources and bank borrowings. Management highlighted that its overseas expansion plans remain intact despite this development. We maintain BUY and S$3.61 fair value estimate on RMG, pegged at 29x FY14F EPS.
Acquisition of land adjacent to Raffles Hospital a sound move
Raffles Medical Group (RMG) announced that it has agreed to acquire a land site adjacent to its Raffles Hospital from the Singapore Land Authority for S$105.2m. Given its plot ratio of 5.6 times, this would yield a GFA of 11,077.36m2. Coupled with prior provisional approval from URA to extend its existing Raffles Hospital premises, this implies that RMG will be able to boost its total hospital GFA by 72% to 49,217.28m2 upon completion. Both this land and its existing hospital site have a 99-year leasehold (commenced on 1 Mar 1979). We are positive on this move given our robust view on Singapore’s healthcare market potential in the long term and also RMG’s strong track record as a medical services provider to both local and foreign patients. The estimated development cost (including land purchase and construction costs) amounts to S$310.0m and will be financed by internal resources and bank borrowings. Construction is expected to begin in 2Q14 and will take approximately 24 months.
Full-fledged hospital, but more to come
As at 30 Sep 2013, RMG was in a healthy net cash position of S$141.7m. It also received gross proceeds of S$120m in 4Q13 from the sale of its Thong Sia commercial podium, part of which was used to finance the purchase of a property in Holland Village. Total capex for these two projects is estimated to sum up to ~S$430m, of which 40% is projected to be incurred in FY14 and FY15 each, and the remaining 20% in FY16. Once completed, RMG will be able to expand its range of sub-specialty centres and also its healthcare education and clinical research activities.
Maintain BUY
Management highlighted that its overseas expansion plans remain intact despite its recent spending spree in Singapore. It is still finalising details of its two framework agreements in Shenzhen and Shanghai, China. We retain our forecasts for now as this new development will likely begin contributing only in 2H16. Maintain BUY and S$3.61 fair value estimate on RMG, pegged at 29x FY14F EPS.
Raffles Medical Group (RMG) announced that it has agreed to acquire a land site adjacent to its Raffles Hospital from the Singapore Land Authority for S$105.2m. Given its plot ratio of 5.6 times, this would yield a GFA of 11,077.36m2. Coupled with prior provisional approval from URA to extend its existing Raffles Hospital premises, this implies that RMG will be able to boost its total hospital GFA by 72% to 49,217.28m2 upon completion. Both this land and its existing hospital site have a 99-year leasehold (commenced on 1 Mar 1979). We are positive on this move given our robust view on Singapore’s healthcare market potential in the long term and also RMG’s strong track record as a medical services provider to both local and foreign patients. The estimated development cost (including land purchase and construction costs) amounts to S$310.0m and will be financed by internal resources and bank borrowings. Construction is expected to begin in 2Q14 and will take approximately 24 months.
Full-fledged hospital, but more to come
As at 30 Sep 2013, RMG was in a healthy net cash position of S$141.7m. It also received gross proceeds of S$120m in 4Q13 from the sale of its Thong Sia commercial podium, part of which was used to finance the purchase of a property in Holland Village. Total capex for these two projects is estimated to sum up to ~S$430m, of which 40% is projected to be incurred in FY14 and FY15 each, and the remaining 20% in FY16. Once completed, RMG will be able to expand its range of sub-specialty centres and also its healthcare education and clinical research activities.
Maintain BUY
Management highlighted that its overseas expansion plans remain intact despite its recent spending spree in Singapore. It is still finalising details of its two framework agreements in Shenzhen and Shanghai, China. We retain our forecasts for now as this new development will likely begin contributing only in 2H16. Maintain BUY and S$3.61 fair value estimate on RMG, pegged at 29x FY14F EPS.
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